📦 Industrial & Investment

Self-Storage Facility Investment & Lease Analysis: Complete 2026 Guide for Buyers and Operators

Q: What are the key differences between a self-storage ground lease and an operator lease?

A self-storage ground lease involves the facility operator leasing the land from a landowner and owning the improvements (buildings, gates, climate control) themselves. The operator builds the facility on the leased land and retains ownership of the improvements for the lease term. At lease expiration, improvements typically revert to the landowner unless there's a purchase option. Ground lease terms for self-storage typically run 30–50 years with options. An operator lease (also called a master lease), by contrast, involves the operator leasing the entire facility—land and buildings—from the property owner, then subletting individual storage units to end customers. The operator takes the revenue risk and operating cost. Operator leases typically run 5–15 years with options and include percentage rent or flat minimum-plus-variable structures. The key distinction: in a ground lease, the operator has substantial capital at risk in improvements; in an operator lease, the capital risk is lower but the operating risk is fully borne by the operator.

Q: How do self-storage cap rates and NOI calculations work for lease-encumbered properties?

Self-storage cap rates in 2026 range from 4.5%–7.5% depending on market, facility quality, and occupancy. For a lease-encumbered facility (one subject to an operator or management lease), the cap rate applies to the NOI as defined by the lease structure. For an owner-operated facility, NOI = gross revenue − operating expenses (before debt service and depreciation). For a master lease structure, NOI = lease rent received from operator − property-level expenses (taxes, insurance, major CapEx). A $2M NOI facility at a 6% cap rate = $33.3M valuation. Key: a management agreement that caps the owner's upside (by capping revenue sharing at current levels) can suppress the cap rate calculation and reduce acquisition value. Buyers must model both in-place NOI and stabilized NOI at market rents when analyzing lease-encumbered facilities.

Q: What should buyers look for in self-storage unit rental agreements during due diligence?

Individual storage unit rental agreements are technically short-term leases—usually month-to-month—between the facility operator and end customers. During acquisition due diligence, buyers should review: (1) the percentage of units on month-to-month vs. longer-term agreements (affects revenue predictability); (2) whether rental agreements are governed by the state's Self-Storage Facility Act, which varies dramatically by state and controls lien rights, auction procedures, and maximum late fees; (3) the enforceability of lien sale provisions—if the state has specific auction notice requirements that haven't been followed, lien sales may be challenged; (4) rental rate schedules and whether existing customers are paying below-market rates (revealing upside potential); and (5) non-standard provisions in older agreements that may conflict with state law, creating legal exposure for the acquirer.

Q: How does climate control affect self-storage lease economics?

Climate-controlled units command 25%–65% rent premiums over non-climate-controlled units in comparable markets. A standard 10×10 non-climate unit at $100/month becomes $125–$165/month with climate control. The economics for investors: HVAC systems cost $8–$15/SF to install and $0.50–$1.50/SF per year to operate (electricity + maintenance). For a 50,000 SF climate-controlled facility, annual HVAC operating costs run $25,000–$75,000. When reviewing lease terms for climate-controlled facilities, confirm: (1) who bears HVAC operating costs (typically the operator, but some structures pass through to tenants as a 'climate control surcharge'); (2) temperature guarantee standards (most operators maintain 55–85°F); (3) HVAC capital replacement responsibility; and (4) whether future HVAC failures allow rent abatement under the unit rental agreements.

Q: What are the most important lease provisions in a self-storage ground lease for the operator?

For a self-storage operator building a facility on a ground lease, the most critical provisions are: (1) Leasehold mortgage rights—the ability to encumber the leasehold interest as collateral for construction financing; most institutional lenders require a non-disturbance agreement from the landowner; (2) Ground rent escalation structure—fixed CPI-based escalation is preferable to FMV resets, which can dramatically increase rent at renewal; (3) Improvement ownership and reversion—who owns the buildings and improvements at lease end; (4) Permitted use breadth—can the operator add climate control, vehicle storage, boat and RV storage, or truck rental without needing landlord consent?; (5) Termination buyout rights—if the landowner wants to sell, does the operator have a right of first offer on the land?; and (6) Condemnation provisions—how are insurance proceeds and condemnation awards split between land value and improvement value.

Q: How do REIT acquisitions of self-storage facilities affect existing leases?

REIT acquisitions (Public Storage, Extra Space Storage, CubeSmart, Life Storage/Extra Space) typically acquire self-storage facilities with specific lease-related priorities: (1) Existing operator leases or management agreements are usually terminated at acquisition—REITs want to operate under their own brand and management platform; operators should expect and negotiate for termination provisions and buyout rights when signing with regional operators that may be REIT acquisition targets; (2) Individual unit rental agreements are typically assumed by the acquiring REIT, meaning customers stay on their existing terms; (3) Long-term operator leases that can't be easily terminated suppress REIT acquisition interest (REITs won't pay full value for a facility encumbered by a below-market operator lease); (4) If a facility is subject to a ground lease, REITs will scrutinize ground lease terms carefully—they typically require non-disturbance agreements and leasehold mortgage rights before acquiring ground lease interests.

Self-storage is one of the most lease-complex commercial real estate asset classes in existence. A single facility can involve three or four overlapping lease structures simultaneously: a ground lease on the land, a master operator lease from owner to operator, individual month-to-month unit rental agreements with thousands of end customers, and potentially a vehicle or boat storage sublease with a third party. Understanding each layer—and how they interact during an acquisition—is essential for buyers, operators, lenders, and REIT portfolio managers in 2026.

📅 March 24, 2026 ⏱ 16 min read 📦 Self-Storage • Industrial • Investment Analysis

The Self-Storage Lease Stack: Four Layers

Before analyzing any specific provision, it's critical to understand that self-storage facilities can involve up to four distinct lease layers, each with different parties, terms, and legal implications:

Layer	Parties	Typical Term	Purpose
Layer 1: Ground Lease	Landowner → Operator/Developer	30–50 years + options	Operator leases land, builds and owns improvements
Layer 2: Operator/Master Lease	Facility Owner → Operator	5–15 years + options	Owner leases entire facility to third-party operator
Layer 3: Management Agreement	Facility Owner → Manager	1–5 years	Owner retains ownership; manager operates for fee
Layer 4: Unit Rental Agreements	Operator → End Customer	Month-to-month	Individual storage unit occupancy

Not every facility has all four layers. A fully integrated owner-operator (the most common structure for private self-storage) only has Layer 4. A REIT-owned facility typically has Layer 3 (management agreement with a REIT subsidiary) plus Layer 4. A sale-leaseback or third-party operated facility has Layer 2 or 3 plus Layer 4. Ground-lease-developed facilities add Layer 1 on top of whatever operational structure exists above it.

Self-Storage Market Overview: 2026

The U.S. self-storage industry comprises approximately 50,000 facilities and 2.3 billion rentable square feet as of 2026. The REIT sector (Public Storage, Extra Space Storage/Life Storage, CubeSmart, National Storage Affiliates) controls roughly 18–22% of total supply. Private operators dominate the remaining 78–82%. Key market fundamentals affecting lease economics:

Market Metric	2020	2023	2026	Trend
Average national street rate (10×10 non-CC)	$97/mo	$128/mo	$118/mo	Softening post-pandemic spike
Average climate-controlled premium	28%	35%	31%	Normalizing
National average occupancy rate	91.2%	87.5%	85.9%	Declining from pandemic peak
Cap rate (institutional-grade)	5.0–5.5%	5.5–6.5%	5.5–7.0%	Expanding with interest rates
New supply (sq ft, millions)	42M	68M	55M	Supply pressure in sunbelt

Ground Lease Structures for Self-Storage Development

Ground leases are a common financing structure for self-storage development, particularly when a developer wants to control prime retail-adjacent or highway-visible land without purchasing it. The economics and lease terms differ significantly from typical commercial ground leases because of self-storage's specific revenue and operating characteristics.

Typical Self-Storage Ground Lease Terms

Term Component	Market Standard	Operator Preference	Landowner Preference
Initial term	30–40 years	50+ years	20–30 years (shorter = more control)
Options	2–3 × 10-year options	Multiple options; same economic terms	FMV reset at each option
Ground rent structure	Fixed annual + CPI escalation	Fixed CPI cap (2–3%)	Uncapped CPI or FMV resets
Ground rent % of revenue	8–15% of gross revenue (or flat)	Fixed flat rent only	Percentage rent with no cap
Leasehold financing rights	Required for most lenders	Mandatory; lender SNDA required	Subject to landowner approval
Improvements reversion	Improvements to landowner at expiration	Purchase option at fair value	Reversion with no additional payment
Subletting/assignment	With landowner consent	Permitted to affiliates; consent for 3rd party	Full landowner approval always

Ground Rent Math: Fixed vs. Percentage Structures

The choice between fixed ground rent and percentage ground rent dramatically affects the operator's profitability and the landowner's upside. Consider a 60,000 SF facility generating $1.8M annually:

Scenario A: Fixed ground rent with CPI escalation Year 1 ground rent: $180,000 (flat annual) Year 10 ground rent (3% CPI): $180,000 \times (1.03)^10 = $241,874 Year 20 ground rent: $241,874 \times (1.03)^10 = $324,961 Operator NOI Year 1: $1,800,000 \times 55% operating margin = $990,000 - $180,000 = $810,000 Operator NOI Year 10: ~$2,100,000 \times 55% = $1,155,000 - $241,874 = $913,126 Scenario B: 12% percentage rent (no minimum) Year 1 ground rent: $1,800,000 \times 12% = $216,000 Year 10 ground rent: $2,100,000 \times 12% = $252,000 Year 20 ground rent: $2,500,000 \times 12% = $300,000 Operator NOI Year 10 under Scenario B: $1,155,000 - $252,000 = $903,000 Difference (Year 10): Scenario A saves operator $10,126/year Difference cumulates: by Year 20, Scenario A saves ~$320,000 vs. Scenario B

The difference seems modest in Year 10, but becomes significant if the facility outperforms projections. If revenue grows to $3.5M by Year 20 under percentage rent, the landowner's take grows to $420,000 vs. $325,000 under the fixed structure—an additional $95,000/year directly from the operator's pocket.

Operator/Master Lease Analysis

An operator or master lease structure is most common when a passive real estate investor (family office, pension fund, or individual investor) owns a self-storage facility but lacks the operational expertise to run it. They lease the entire facility to a third-party operator at a fixed rent or minimum-plus-variable structure.

Three Common Operator Lease Structures

Structure	Rent Formula	Owner Risk	Operator Risk
Fixed minimum lease	Flat annual rent regardless of performance	Low (assured income)	High (pays rent even at 60% occupancy)
Variable lease (% of revenue)	X% of gross revenue, no minimum	High (zero income if facility struggles)	Low (payments scale with performance)
Hybrid: minimum + percentage	Higher of $X minimum or Y% of gross	Medium (floor protection)	Medium (limited by upside sharing)

Market standard for operator leases in 2026 is a hybrid structure: greater of $X fixed minimum or 60–70% of gross revenue. This protects the owner with a floor while allowing the operator to profit from performance upside. The operator retains 30–40% of gross revenue above the minimum to cover operating costs and profit.

Key Operator Lease Provisions

Beyond rent structure, the following provisions are critical in a self-storage operator lease:

Exclusive territory: Operator often demands a non-compete preventing the owner from leasing or managing a competing facility within a 3–5 mile radius
Rebranding rights: Can the operator brand the facility under their own name? Is the owner permitted to continue branding under a prior operator's flag?
Capital expenditure responsibility: Is the operator responsible for CapEx during the lease term, or does the owner retain capital improvement obligations?
Technology systems: Who owns the management software, revenue management system, and customer data? At lease end, does the owner retain access?
Acquisition right: Operators often negotiate a right of first offer to purchase the facility if the owner decides to sell during the lease term
Cure rights for lender default: If the facility is mortgaged, the operator should have cure rights to prevent their lease from being terminated by a lender foreclosure

Management Agreement Structures

Unlike an operator lease (where the operator takes revenue risk), a management agreement is a service contract: the owner retains all revenue and bears all operating risk, while the manager receives a management fee. This structure is most common for institutional owners (REITs, pension funds, family offices).

Management Fee Structure	Typical Rate	Pros	Cons
Flat percentage of gross revenue	4–8% of gross	Simple; predictable	Manager earns more when owner earns more (misalignment)
Percentage of EGI (effective gross)	5–9% of EGI	Aligns incentives on occupancy	Complex; disputes over EGI definition
Base fee + performance bonus	3–5% base + 10–15% of NOI above threshold	Strong performance alignment	NOI manipulation risk; complex waterfall
Fixed monthly fee	$5,000–$25,000/month	Predictable cost for owner	No incentive alignment; manager earns same whether occupied or not

For institutional acquirers, management agreements with excessive fees or long terms suppress NOI and thus suppress acquisition value. A 9% management fee on a $1.8M gross revenue facility consumes $162,000 annually—equivalent to approximately $2.7M of asset value at a 6% cap rate.

Individual Unit Rental Agreement Analysis

The individual unit rental agreements with storage customers are technically leases—and they carry significant legal exposure if they don't comply with state-specific Self-Storage Facility Acts. Every state has enacted legislation governing storage facility lien rights, and the requirements vary substantially.

State Self-Storage Act Key Provisions by State

State	Act	Pre-Lien Notice Required	Auction Method	Minimum Late Fee Cap
California	Business & Professions Code §21700	14-day notice by mail + email	Online auction or in-person	$20 flat or 20% of monthly rent
Texas	Property Code Chapter 59	14 days + advertisement	Public sale; may be online	No cap; reasonable amount
Florida	Statute §83.801	14-day notice; must include email	Online or in-person; 2-week ad	$20 or 20% of rent
New York	Lien Law Article 7-A	21-day notice by certified mail	In-person public auction	$50 flat
Illinois	770 ILCS 95	14-day notice	Public auction	Reasonable
Colorado	C.R.S. §38-21.5	14 days	Online permitted	$20 or 20%

During acquisition due diligence, a buyer should review a sample of existing rental agreements to confirm compliance with the state's Self-Storage Act. Non-compliant agreements create lien sale exposure: if a delinquent tenant challenges an auction based on procedural non-compliance, the operator may owe damages and lose the ability to pursue the unpaid balance.

Cap Rate and NOI Analysis for Lease-Encumbered Facilities

Valuing a self-storage facility requires understanding how the lease structure affects NOI at each level. The following model illustrates a 60,000 SF facility under three different ownership/operational structures:

FACILITY: 60,000 rentable SF | 85% occupancy | Average rate: $1.75/SF/month Gross Potential Revenue (GPR): 60,000 \times $1.75 \times 12 = $1,260,000 Less vacancy (15%): ($189,000) Effective Gross Income (EGI): $1,071,000 Other income (truck rental, insurance, admin fees): $95,000 Total Gross Revenue: $1,166,000 OPERATING EXPENSES: Property taxes: $65,000 Insurance: $28,000 Utilities: $42,000 Payroll (2 FTE): $95,000 Marketing (online, SEO, PPC): $38,000 Management fee @ 6%: $69,960 Maintenance and repairs: $22,000 Total Operating Expenses: $359,960 NET OPERATING INCOME (NOI): $1,166,000 - $359,960 = $806,040 VALUATION: At 5.5% cap rate: $806,040 \div 0.055 = $14,655,273 At 6.5% cap rate: $806,040 \div 0.065 = $12,400,615 At 7.0% cap rate: $806,040 \div 0.070 = $11,514,857 1% change in cap rate = $3,140,416 in value difference

The critical insight: a 1% change in cap rate changes the facility's value by approximately $3.1M. Lease terms that suppress NOI (high management fees, below-market operator leases, long-term rent concessions to tenants) directly translate into reduced acquisition value. Buyers should model the stabilized NOI (what the facility would earn under optimal operations) alongside the in-place NOI to identify hidden value.

Lien Enforcement and Unit Auction Economics

A well-run self-storage facility generates meaningful income from lien sales of abandoned or delinquent units. Average delinquency rates run 3–8% of total units at any time. The lease/rental agreement must comply with state law to enforce liens successfully. Key metrics:

Metric	Typical Range	Well-Run Facility
Monthly delinquency rate	4–8% of units	2–4% of units
Units going to lien sale annually	2–5% of total units	1–2% of total units
Average auction proceeds per unit	$150–$800	$300–$600 (with online auctions)
Recovery of unpaid rent from auction	20–60% of arrears	40–70%
Operating cost per lien sale	$75–$150 (notices, admin)	$50–$100

Properly drafted rental agreements with compliant lien sale procedures are worth $15,000–$50,000 annually in recovered revenue for a 300-unit facility. During due diligence, buyers should specifically audit the seller's delinquency management process and confirm that auction proceeds were recorded and deposited correctly.

Climate Control Lease Economics

Climate-controlled units are the single greatest driver of revenue per square foot in self-storage. The investment and lease economics of climate control:

Non-climate 10\times10 unit: $105/month Climate-controlled 10\times10 unit: $145/month (+$40/month = +38% premium) Annual revenue per unit: Non-climate: $105 \times 12 = $1,260 Climate: $145 \times 12 = $1,740 Premium: $480/unit/year For 200 climate-controlled units: Annual premium revenue: $480 \times 200 = $96,000 HVAC installation cost (retrofit): $12/SF \times 20,000 SF = $240,000 Annual HVAC operating cost: $0.85/SF \times 20,000 = $17,000 Simple payback on HVAC investment: $96,000 premium - $17,000 operating cost = $79,000 net annual benefit $240,000 \div $79,000 = 3.0 years payback Capitalized value of $79,000 at 6% cap rate = $1,316,667 in property value added HVAC investment ROI: ($1,316,667 - $240,000) \div $240,000 = 449% return on investment

This math explains why climate-control retrofit projects consistently rank as the highest-ROI capital investment in self-storage. Lease due diligence should always evaluate whether the facility has maximized its climate-control unit ratio and whether the rental agreements allow for climate-control surcharges that can be varied without triggering lease violation claims.

Boat, RV, and Vehicle Storage Leases

Many self-storage facilities include outdoor boat, RV, and vehicle storage areas. These generate meaningful ancillary revenue ($75–$250/month per space depending on covered vs. uncovered) and have different lease dynamics than interior storage units:

Longer commitments: Vehicle storage customers are typically less transient than interior unit customers, often staying 6–24+ months
Lien rights variability: Some states have less clear lien rights for outdoor vehicle storage vs. interior units; the rental agreement must specify the operator's lien rights explicitly
Insurance requirements: Vehicle storage operators should require customers to maintain comprehensive auto insurance and name the facility as an additional insured
Damage liability: Outdoor storage agreements should clearly disclaim operator liability for weather damage, flood, theft, and vandalism to stored vehicles
Zoning compliance: Outdoor vehicle storage may require specific zoning approvals; the lease should represent that the site is appropriately zoned for the intended use

REIT Acquisition Lease Considerations

The five largest self-storage REITs—Public Storage, Extra Space Storage, CubeSmart, NSA, and Smartstop—collectively acquire hundreds of facilities annually. Their acquisition underwriting is heavily lease-focused:

Lease Issue	REIT Acquisition Impact	Value Effect
Long-term operator lease (10+ years, below market)	May decline acquisition or require lease termination	Significant value discount
Ground lease with FMV reset provision	Requires full ground lease term modeling	Cap rate adjustment for lease risk
Non-compliant unit rental agreements	Require remediation before closing	Delay; potential price reduction
Management agreement with long remaining term	Must be terminable at closing or assumed	Termination cost may hit price
No existing lien sale compliance documentation	Extended due diligence; potential escrow holdback	Holdback of 1–3% of purchase price

12-Item Self-Storage Lease Due Diligence Checklist

✅ Self-Storage Acquisition Lease Due Diligence Checklist

Ground Lease Review: If the facility is on ground-leased land, confirm remaining term length, option structure, rent escalation caps, leasehold mortgage rights, and improvement reversion provisions
Operator/Master Lease Analysis: If the facility is subject to an operator lease, confirm remaining term, rent structure (fixed vs. variable), termination rights, and operator acquisition rights
Management Agreement Terms: Review management fee structure, term length, termination rights, and transition provisions; model the NOI impact of management fee elimination
Unit Rental Agreement Compliance: Confirm all active unit rental agreements comply with the state's Self-Storage Facility Act, including lien notice requirements, late fee caps, and auction procedures
Delinquency Audit: Review the facility's delinquency records for the past 24 months; confirm lien sale documentation and auction proceeds were properly recorded
Rental Rate Analysis: Compare in-place rental rates to current street rates and competitor rates; identify below-market units with revenue upside potential
Climate Control Documentation: Confirm the percentage of climate-controlled units and review climate control surcharge provisions in rental agreements
Vehicle Storage Agreements: Review boat, RV, and vehicle storage agreements for lien rights compliance, insurance requirements, and damage limitation provisions
Technology and Data Rights: Confirm ownership of management software, customer data, and revenue management systems; verify data portability at transition
Zoning and Permitted Use: Confirm the facility is properly zoned for all current uses including outdoor vehicle storage, moving truck rental, and ancillary retail
Non-Compete Provisions: Identify any non-compete restrictions in operator or management agreements that could limit the acquirer's ability to develop or acquire nearby facilities
NOI Normalization: Normalize NOI by removing one-time revenues, adding back below-market management fees, and adjusting for non-recurring expenses to establish true stabilized NOI for cap rate valuation

Sale-Leaseback Structures in Self-Storage

Sale-leaseback transactions—where an operator sells the facility to an investor and simultaneously signs a long-term lease to continue operating it—have become increasingly common in self-storage as operators seek to monetize their real estate equity while retaining operational control. Key lease terms in a self-storage sale-leaseback:

✓ Sale-Leaseback Math: An operator owning a facility worth $15M with a $4M mortgage can sell for $15M, retire the $4M mortgage, and net $11M in cash—while retaining operational control via a 20-year NNN leaseback at a 5.75% cap rate ($862,500/year in rent). The operator converts illiquid real estate equity into deployable capital while maintaining the business.

Lease term: Typically 15–25 years initial with multiple renewal options (investor requires long term for financing)
Rent structure: Triple net (NNN)—operator pays all property taxes, insurance, and maintenance
Escalation: Fixed annual escalation (1.5–2.5% per year) or CPI-linked with caps
Purchase option: Operator often retains a purchase option at a fixed price or FMV after a specified period
Right of first offer: If investor wants to sell, operator has right of first offer to repurchase the facility
Capital expenditure allocation: Who handles major roof, HVAC, and infrastructure replacements during a long-term leaseback?

FAQ: Self-Storage Facility Investment & Lease Analysis

What are the key differences between a self-storage ground lease and an operator lease?

A ground lease involves the operator leasing only the land and building improvements themselves, retaining ownership of the structures. An operator lease involves leasing the entire facility (land + buildings) from the owner and subleasing individual units to customers. Ground leases run 30–50 years; operator leases run 5–15 years. Ground lease operators have more capital at risk (improvements they built); operator lease tenants have lower capital risk but bear full operating risk.

How do self-storage cap rates and NOI calculations work for lease-encumbered properties?

Cap rates for self-storage in 2026 run 5.5–7.0% depending on market and facility quality. For lease-encumbered facilities, NOI is calculated after the lease structure (management fees, operator lease payments) is reflected. High management fees (9%+ of gross revenue) suppress NOI by $100,000–$200,000 annually on mid-size facilities, reducing acquisition value by $1.5M–$3.5M at a 6% cap rate. Always model stabilized NOI (removing management fees, normalizing rents) alongside in-place NOI.

What should buyers look for in self-storage unit rental agreements during due diligence?

Focus on: (1) state Self-Storage Act compliance for lien rights and auction procedures; (2) in-place vs. market rental rate comparison to identify upside; (3) month-to-month vs. longer-term agreements; (4) non-standard provisions in older agreements that conflict with current state law; and (5) documentation confirming historical lien sales were properly conducted with required notices provided.

How does climate control affect self-storage lease economics?

Climate-controlled units command 25–65% rent premiums over non-climate units. A retrofit adding climate control to 20,000 SF costs approximately $240,000, generates $79,000+ in net annual benefit (premium revenue minus HVAC operating costs), and creates approximately $1.3M in added property value at a 6% cap rate—a 449% ROI. Lease agreements for climate-controlled units should specify temperature maintenance standards and clarify who bears HVAC operating and capital costs.

What are the most important lease provisions in a self-storage ground lease for the operator?

The five most critical provisions: (1) leasehold mortgage rights enabling construction financing; (2) fixed CPI-based rent escalation with a 3% cap (not FMV resets); (3) improvement ownership—operator should own improvements during the lease term; (4) permitted use breadth covering all storage formats; and (5) right of first offer to purchase the land if the landowner decides to sell. Failure to negotiate these provisions can cost millions over a 30–50 year ground lease term.

How do REIT acquisitions of self-storage facilities affect existing leases?

REITs (Public Storage, Extra Space, CubeSmart) typically terminate existing operator and management agreements at acquisition and re-brand under their own flag. Individual unit rental agreements are assumed. Long-term below-market operator leases that can't be terminated suppress REIT acquisition interest and pricing. Ground leases require non-disturbance agreements and leasehold mortgage rights before REITs will acquire. A facility encumbered by a poorly structured operator lease may sell at a 10–20% discount to clean-title facilities.

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